Shaping entrepreneurship in developing countries: the role of savings and credit groups

Abstract

ABSTRACT In this study, we analyse savings and credit groups (SCGs) to investigate whether belonging to these groups contributes favourably to entrepreneurship. SCGs are community-based groups that represent a form of informal finance in developing countries. For the analysis, we adopt the social embeddedness theory, and test our hypotheses on a unique sample of respondents to a survey in Kenya finding a positive relationship between SCGs and the creation of new ventures. The results show that the levels of education and wealth are positively associated with the likelihood of creating a new venture, but SCG membership negatively moderates these relationships. Thus, the benefits of SCG membership are larger for less-educated and less-wealthy individuals that can offset, at least in part, the disadvantages related to these low levels. Finally, to provide insights for future research and policy, we focus on the group characteristics associated with the likelihood of creating new ventures.